Weekly resin report: PE producers eye price increase while PP prices pull back sharply

For the second week in a row, the spot resin markets transacted at a reduced rate, which was quite a contrast from the super active first half of January. Short term resin demand has now slowed after spot polyethylene (PE) and polypropylene (PP) prices soared during January, reports the PlasticsExchange (Chicago) in its Market Update. Resin supplies for immediate delivery remain fairly snug, but began showing signs of improvement. PE producers appear set to implement their $0.04/lb price increase for February contracts. However, with PGP monomer prices deflating, PP producers in February will be giving back a chunk of the $0.09/lb cost-push increase they gained in January. 

PE trading was relatively slow and prices were mostly steady, with some variance among grades. While Prime levels remain firm, some weakness is developing for off-grade materials. The spot PE market feels tired after rising as much as $0.09/lb during January, as it swung from a discount to premium to contracts. The marketplace has essentially accepted the $0.04/lb increase slated for February and several producers, who apparently wish to seal the deal, have backed the increase with another $0.03/lb nomination for March, according to the PlasticsExchange. 

Spot PP prices pulled back sharply, falling $0.04/lb on average, as feedstock prices plunged. Off-grade prices had already started to come undone and now generic prime prices have begun to follow. Resin sellers, recognizing that the top of this rally is already in place, dropped asking prices while seeking orders. Resin buyers, who did not have an urgent need for material, backed away from the market, allowing gravity to do its job. Relief of monomer cost-push pressure will translate to reduced PP prices, but it probably will not have a huge impact on spot supply, which remains tight. Still, February PP contracts will come down and should wipe away part of the January $0.09/lb increase.

Read the full Market Update on the PlasticsExchange website.